| EVC International N.V. - First Quarter 2005 Results Key Features - Group turnover of EUR 309.1 million (Q1
2004: EUR 309.0 million) Market Conditions First quarter PVC sales were below the very strong Quarter One 2004. A slow start to 2005 due to cold weather across Europe and destocking activities at the PVC converters has resulted in some PVC stock build across the industry that should allow better coverage of VCM/PVC shutdowns from March through to October. Demand has improved somewhat during April and forecasts for the next three months suggest a return to traditional volumes for the industry. Despite the lower sales volumes and price pressure EVC's margins remained above those of Quarter One 2004. Average contract raw material prices fell during the first quarter with ethylene price increases offset by falls in the price of chlorine and EDC. Selling prices are expected to reflect the increased ethylene prices in Quarter Two. During Quarter One the downstream businesses benefited from both increasing Film and Compound prices and reducing PVC input prices however, as for PVC, demand was weak. Resulting sales volumes were therefore below those of the equivalent period in 2004. Financial Review Result of Operations Group sales at EUR 309.1 million were very marginally higher than the equivalent period in 2004, with higher resin prices offset by lower volumes across all EVC's business groups. Overall, cost of sales decreased by 1.5 %, with higher raw material prices offset by lower volumes and continued reductions in plant fi xed costs. For the quarter, the Group returned a gross margin of EUR 22.9 million, a EUR 4.5 million increase versus 2004. Expenses at EUR 11.1 million were EUR 2.0 million lower than the equivalent period in 2004, reflecting the continued focus on cost reductions. As a result Group operating income increased by EUR 6.5 million to EUR 11.8 million compared with EUR 5.3 million last year. Net financial expenses at EUR 5.0 million were EUR 0.7 million lower than 2004. The Group produced an income after financing and before taxation of EUR 6.8 million (Q1 2004: EUR 0.4 million expense) and EUR 2.8 million (Q1 2004: EUR 2.2 million expense) after taxation. Taxation for the quarter was EUR 4.0 million, up EUR 2.2 million primarily in Germany due to a combination of income and deferred tax increases. The net income attributable to equity shareholders for the first quarter was a gain of EUR 2.7 million compared to a loss of EUR 2.3 million in 2004. Cash Flow The Group recorded a EUR 26.1 million cash outflow before financing in Quarter One 2005, compared to an inflow of EUR 3.0 million last year. A major working capital outflow was in inventories, where the slack demand and preparation for shutdowns in Quarter Two led to further stock build above the traditionally high December levels. Trade receivable movements negatively impacted working capital as in 2004, but in 2005 EVC was unable to offset the increased receivables with increased payables. Capital expenditure was strictly controlled and amounted to EUR 4.1 million (Q1 2004:EUR 8.9 million). An investment of EUR 1.8 million was also made in a consortium at the Porto Marghera (Venice) site. The consortium has been set up for the management of general services and utilities on the Porto Marghera petrochemical site and EVC Italy is a key user of these site services. Financial Position At 31 March 2005 the Group had gross borrowings of EUR 279.2 million, up EUR 8.9 million compared to 31 December. In March 2005 EVC lent EUR 7.3 m (GBP 5 million) to INEOS Chlor to contribute to the funding of INEOS Chlor's chlorine regeneration and re-investment programme at its Runcorn site. This loan was part of EVC's total loan commitment of GBP 11 million and the remaining GBP 6 million is expected to be paid in Quarter Two 2005. EVC drew down EUR 10 million under the revolving credit facility in March to help fund the working capital increase and the Chlor loan. A further draw down has been made in April 2005. The net debt position at 31 March 2005 after deducting cash balances of EUR 37.6 million was EUR 241.6 million, an increase of EUR 32.1 million on the 2004 year end position. Outlook Quarter One 2005 has, as noted above, been affected by supplier and converter overstocking during Quarter Four 2004 and the resultant weaker demand. April has seen positive developments in the PVC markets and stocks are expected to reduce. Demand in the downstream businesses remains weak and margins will depend on raw material input price in the coming months. INEOS Share Offer On 30 March 2005 EVC announced that INEOS Vinyls Holdings Limited (INEOS), a wholly owned subsidiary of Hawkslease Finance Company Limited, made an offer to acquire 100% ownership of all EVC's business. All current discussions contemplate a sale of substantially all of EVC's assets and liabilities. Any such sale would be followed by a liquidation of EVC and the distribution of the cash to its shareholders. EVC's business and operations would be continued by INEOS. Pursuant to this transaction, approximately EUR 4.45 per EVC ordinary share will eventually be distributed to the shareholders of EVC. It is expected that this transaction will be completed in May 2005. The Management and Supervisory Board have carefully reviewed the proposed offer, are seeking external legal and valuation advice and expect that agreement can be reached between INEOS and EVC.
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